Rivals Appear in Harmony on Regulation

Reacting to weekend events in the financial markets, the two major presidential candidates renewed calls Monday for a regulatory restructuring, and the Senate Banking Committee postponed a hearing with regulators on the government's takeover of the government-sponsored enterprises.

Economic advisers to the Republican nominee, Sen. John McCain, and the Democratic nominee, Sen. Barack Obama, exhibited little difference between the two campaigns, with both asserting that consolidating financial regulatory agencies and beefing up their oversight would be a part of their candidate's roadmap for his presidency.

Speaking at a National Association of Federal Credit Unions conference, Ike Brannon, a senior policy adviser to Sen. McCain, said, "The regulatory situation in the financial markets is … a total mess. You have regulators that duplicate each other's efforts. You have some entities that aren't covered by any regulatory oversight whatsoever. The attorney general of New York State is effectively the head regulator of Wall Street. There is a sense that Washington is woefully out of touch."

Speaking on behalf of Sen. Obama, Gary Gensler, a former Treasury official in the Clinton administration, offered a similar view. On regulatory restructuring, he said, "the two candidates might be closer together … than I realized."

Summing up Sen. Obama's plan, Mr. Gensler said the Illinois lawmaker would "provide the Federal Reserve with supervisory authority over any financial institutions that might have access to its [discount] window … . The capital, liquidity, and disclosure requirements need to be enhanced throughout the financial system. He has called for the end of the balkanization of the regulators."

Sen. Obama wants to "regulate financial institutions more for what they do rather than who they are, more toward … functional regulation than charter regulation," he said.

Separately, the Senate Banking Committee decided to delay a hearing planned for Tuesday with the Treasury Department and the Federal Housing Finance Agency on the government's decision to put Fannie Mae and Freddie Mac into conservatorship. Sources said the Treasury asked that the hearing be delayed because Secretary Henry Paulson is too busy monitoring the markets. It was unclear when the hearing would be rescheduled or whether a hearing planned for Thursday with other regulators on recent bank failures would be refocused to include an examination of the GSEs or would also be delayed.